Can Increasing Your Retirement Savings by 1% Make a Difference?

6 Minute Read

If you’re following Dave’s Baby Steps, you’ve done a lot of work before you even start saving for retirement!

You may have knocked your $1,000 starter emergency fund out of the way three years ago and said “so long” to debt last year. Today, you may be sitting pretty with a fully stocked emergency fund and want to start saving for retirement. But you don’t have 15% to invest like Dave recommends. So you put your retirement savings on the shelf, waiting for the day you can give it your all.

Or maybe you’ve been building your nest egg for years but can’t seem to work your way up to 15%. You watch your big plans for retirement get a little smaller every year you stay stuck at 5%.

Sound familiar? If so, it’s time to shake the self-doubt and start thinking like Dave Ramsey! So you don’t have 15% to contribute—that’s okay! Every little bit you can contribute to your retirement savings makes a difference.

Investing in your future isn’t an all-or-nothing venture, and you don’t have to stay stuck in one place forever.

So instead of getting hung up on 15% or nothing, consider increasing your retirement contributions by just 1% this year. That seems way more realistic, right?


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With a little patience and these simple steps, you’ll easily be able to boost your retirement savings!

Step 1: Break Saving for Retirement Into Baby Steps

As a Dave fan, you know the value of breaking financial goals into bite-sized chunks. Why not apply the same logic to saving for retirement? For Monica W., a teacher from Springfield, Illinois, her family’s biggest obstacle for their retirement savings has been the daycare bill. At $1,500 a month during the school year, it’s larger than their mortgage. Rather than look at it as a lost cause, she and her husband have set small goals to work up to 15%.

“We’re currently at 10% of take-home pay and will be able to increase to 10% of gross this fall. As our kids age out of daycare and we get raises, we’ll be able to increase our retirement contributions to the full 15%,” Monica says.

Keith C., who lives in Suwanee, Georgia, also took a stepped approach after taking a break from investing for a year to start his own business. “Contributing a little is always better than contributing nothing,” he says. “As my business and income grow, I’ll continue to increase our retirement contributions.”

Will these incremental efforts really pay off in retirement? You bet they will! Consider this example.

According to recent Vanguard report on how Americans save for retirement, the average 401(k) contribution is 6.2% of pay.* That’s a good place to start!

Let’s say you make $50,000 a year and start investing 6% at age 32. If you stay stuck at that percentage until you retire 35 years later, your nest egg could be worth around $895,000. That’s not too shabby, but you could do even better.

What kind of impact does a 1% increase every year make? Turns out, it’s a huge boost to your retirement savings.

With the same $50,000 income, you start off contributing 6% of your pay to your retirement savings— that comes out to $250 a month. Next year, you bump up your contribution by 1%—that makes your contribution $292 per month. If you keep this trend going, you’ll reach your full 15% in 10 years. If you keep investing 15% of your income until you retire, your nest egg could be worth $1,735,000. That 1% increase every year is worth nearly $900,000! That’s a big difference for just a little effort.

Want to get to 15% even faster? Make a 3% increase in your contributions every year, and you’ll be at 15% in just four years.

Step 2: Eliminate Unnecessary Expenses

Let’s come right out of the gate with the most painful step of the bunch—trimming the fat from your budget.

Yep, it’s there.

Maybe it looks like a $250-a-month cable package that magically transports you to the 50-yard line of the Super Bowl. Or the weekly mani-pedi you get at Salon FrouFrou. Whatever your luxury of choice, if it cuts into your ability to save for the future, it’s time to say, “Buh-bye!”

Remember Keith, who took a little-by-little approach to his investing after launching a new business? After reviewing his household bills, he shopped around for cheaper insurance rates and made tough choices, like nixing cable TV.

“Cutting the nonessential services and lowering our insurance expenses freed up a little bit of money that we were able to use to restart our retirement contributions,” Keith says.

Alicia J. from Nevada, Iowa, agrees that forcing yourself to live with less is the key to saving more for retirement, but it doesn’t mean you can’t get creative in the process.

“I encourage friends to come to the house for dinner, rather than eating out. Do fun things like cocktail parties—dress up and have friends bring a unique dish,” Alicia suggests. “You can still have fun without breaking the bank. It's the company that matters!” 

So why not search every nook and cranny of your monthly budget to see if you can eke out an extra 1% this year? That small increase every year could have six-figure results!

Step 3: Create a Reward System

Having trouble keeping your hands off your retirement savings? Add oomph to your goals by throwing a few carrots into the mix! That’s what David J. from Bentonville, Arkansas, did to get out of debt. Now this strategy helps him avoid temptation so he doesn’t use his nest egg to pay cash for shiny, new purchases.

At each benchmark, we have a planned reward to go with the achievement,” David says. “Once we achieve a benchmark, we set the next one and its reward.”

Maybe your reward is a nice steak dinner or a day at the spa with every bump up in percentage—whatever fuels your financial fire! Put it down on paper and post it somewhere prominent as a constant reminder of your goals.

Your Retirement Savings Start Here

Remember, building wealth is a marathon, not a sprint. Don’t lose out on a bright tomorrow because you can’t put 15% toward your nest egg today. If you want to cross the finish line, you’ve got to step out of the starting gate!

Give it all you’ve got right now—even if it’s just 3%—and work with a financial advisor to outline a plan for working your way up to 15%.

Need help putting your plan together? SmartVestor is the free and easy way to find financial advisors who can show you how to build wealth. Get started today!

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